Process of Aggregating estimated costs of individual work
packages to establish an authorized cost baseline. Establishes cost baseline against which
project performance can be monitored and controlled. A Project budget includes all the funds
authorized to execute the project. The cost baseline is approved version of
time phased project budget, but excludes management reserves.
Outputs:
Cost Baseline is
the approved version of the time-phased project budget, excluding any
management reserves, which can be changed through formal change control process
only.
Cost Baseline is used as basis for comparison to actual
results.|
Work Package Costs
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Sum Of work package wise estimates
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Control Account Costs
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=
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Sum of All Work Package costs related to each Control Account
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Cost baseline Cost
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=
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Sum of Control Account Costs + Sum of contingency Reserve where risks
response planning is done
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Project Budget
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baseline + Management Reserve
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Source PMP’s PMBOK
Project Funding
Requirements: Project funding happens in steps i.e. on achieving of certain
milestones. Thus they are not
continuous. This talks about at what timelines the funds get released and how
we can manage the project expenditures with it.
Project Document
Updates: Updates to Risk Register, Activity
cost estimates, Project Schedule etc.
Tools and Techniques
A. Cost Aggregation
- The work package cost estimates are then aggregated for the higher component
levels of the WBS (such as control accounts) and ultimately for the entire
project.
B. Reserve Analysis:
Contingency Reserves are approved for Known and Risks (i.e. Known unknowns)
where risk response strategy is approved by steering committee - It is included
as part of cost baseline -
Cost Baseline = Activity Costs + Contingency reserve costs
Management Reserve - For Unknown Unknowns (i.e. For Unknown
Risks) (eg. Calamity, Earth Quake) - Not included as part of Cost baseline
Project Efforts = Cost Baseline Efforts + Management Reserve
Efforts
Management reserve efforts are taken trough Change control
procedure
C. Expert Judgement: Guided by historical information in an application
area, knowledge area, discipline, industry.
Expert Judgement is available through:
v
Other Functional units within the performing
organization
v
Consultants
v
Stakeholders, including customers
v
Professional and Technical Association
v
Industry Groups
D. Historical
Relationships: Historical Relationships are used in Parametric Estimation
models. Here we establish an semi empirical formula C [Cost] = A + (Parameter)
* B where and A and B are constants
Parameter can be "Per Square Foot cost" in Construction,
"Function Point", "use Case point" etc. If you observe
above equation, A and B are derived based on Historical information and their
relationship.
Parametric Models are accurate when
v
Historical Information used to develop the model
is accurate
v
Parameters used in the model are readily
quantifiable, and
v
Models are scalable, such that they work for
large projects, small projets, and phases of a project.
E Funding Limit
Reconciliation: It may happen that Project Aggregate Cost may be varying
from Approved Project Funding Limits available. In such scenarios, we need to reconcile
both such that they match. It can be done through either we should aim for
increasing Funding Limit (or) we should aim to decrease Project Aggregate cost
through scope cut etc.
Inputs:
A. Cost Management
Plan - Describes level of detail necessary to carry out Cost management
plan
B. Scope Baseline -
WBS, deliverables, Constraints and Assumptions- Additional Info like
contractual and legal implications such as health, safety, security, performance,
environmental, insurance, Intellectual property rights, licenses and permits.
C. Activity Cost
Estimates - Aggregate cost estimates of each activity within a work package
to obtain cost estimate for each work package.
D. Basis of Estimates
- Basic assumptions taken, Approach taken, Details on inclusons and exclusions
of indirect costs in the project budget.
E. Project Schedule
- Activities with Start/Finish Days, Durations and Resources loaded
F. Resource Calendars
- Available working days or shifts on which each specific resource is available
- Specify how long identified project resources will be available during the
project.
G. Risk Register
- To Estimate Risk Response Costs - Risks which can be either Threats or Opportunities
have an impact on both activity and overall project costs.